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Income Taxes
9 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10 – Income Taxes

Our provision for income taxes is based on an estimated annual tax rate for the year applied to federal, state and foreign income. Income tax expense for the three months ended March 31, 2016 and 2015 was $31.4 million and $19.3 million, respectively. The effective tax rate for the three months ended March 31, 2016 and 2015 was 26.1 percent and 21.6 percent, respectively. The increase in the effective tax rate for the three months ended March 31, 2016 compared to the same period in the prior year was primarily due to higher income in the U.S. that is taxed at higher rates than our key foreign jurisdictions.

Income tax expense for the nine months ended March 31, 2016 and 2015 was $98.0 million and $76.3 million, respectively. The effective tax rate for the nine months ended March 31, 2016 and 2015 was 25.3 percent and 22.1 percent, respectively. The increase in the effective tax rate for the nine months ended March 31, 2016 compared to the same period in the prior year was primarily due to higher income in the U.S. that is taxed at higher rates than our key foreign jurisdictions.

As of March 31, 2016 unrecognized tax benefits and the related interest were $57.8 million and $2.6 million, respectively, all but $6.0 million of which would affect the tax rate if recognized. During the three months ended March 31, 2016, $0.7 million of tax reserves were established on new uncertain tax positions and $0.1 million of tax reserves were reduced based on a settlement with the Indian tax authorities. Related interest on prior year exposures was increased by $0.1 million primarily related to Germany and Brazil and decreased by $0.1 million related to the Indian settlement. During the nine months ended March 31, 2016, $2.1 million of tax reserves were established on new uncertain tax positions and $2.9 million of tax reserves were reduced based on settlements with the German and Indian tax authorities. Related interest on prior year exposures was decreased by $1.4 million primarily related to the German and Indian tax audit settlement.

We periodically reevaluate the recognition and measurement threshold of our uncertain tax positions based on new or additional evidence such as tax authority administrative pronouncements, rulings and court decisions. The ultimate settlement, however, may be materially different from the amount accrued. Our significant jurisdictions are Germany, Brazil, Austria, India and the U.S. The German audit for fiscal years 2005 through 2010 was recently closed, with one issue remaining in dispute; we have filed a formal appeal for this issue and will proceed to the fiscal authority and court. The tax year currently under examination by the Brazilian tax authorities is fiscal year 2008. Austria is not under examination for any tax year. The tax years currently under examination by the United States Internal Revenue Service (“IRS”) are fiscal years 2006 to 2008, 2010 to 2012 for STC and 2012 to 2015. We have reached a tentative agreement with the IRS on two issues being audited for fiscal years 2012 and 2013, research and experimentation credits and the domestic production activity deduction. We expect these issues to be settled within the next 12 months and estimate that unrecognized tax benefits will decrease by $2.8 million and $0.5 million, respectively. Although the final resolution of the proposed adjustments is uncertain, we believe that the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations and cash flows. While we expect the amount of unrecognized tax benefits to change, we are unable to quantify the change at this time.